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Frequently Asked Questions

 

 

1. Why is a mortgage pre-approval important?

Mortgage pre-approval is important for a number of reasons:

  • It determines the maximum mortgage loan for which you qualify. 
  • It allows your realtor to show you a range of properties in your price range. 
  • It allows your realtor to make a realistic offer on your purchase, and saves time in the negotiation process. 
  • It holds the interest rate for a period of up to 120 days, guarding you against rate fluctuations. 
  • It provides peace of mind during the home-buying process.


2. May I use my RRSP to make a down payment?

A federal government plan allows first-time homebuyers to use their RRSP's to help finance their home purchase. This money can be used as a down payment, or to help with other closing costs. The RRSP home ownership withdrawal forms are available from your RRSP holder. The criteria are as follows:

  • Each applicant can withdraw up to $20,000. 
  • Applicants cannot have owned a principle residence within the past 5 years. 
  • You must reside in the home for at least one year. 
  • The RRSP funds must have been invested for more than 90 days before withdrawal to qualify. 
  • The withdrawn amount must be repaid, over an interest-free repayment period that can be as long as 15 years. 


3. What is an open mortgage?

An open mortgage gives you the most flexibility in making extra payments towards your mortgage principle and even lets you pay off your mortgage entirely whenever you wish to. If you have uncertainty in your life such as serious illness, a looming separation or a possible job transfer to another city, it is better to have an open mortgage. This way if you have to move, you can pay off your mortgage without penalty. This could save you thousands in prepayment penalties. 

Warning! Not all open mortgages are created equal. Check to see just how ‘open' your mortgage is!

4. What is a closed mortgage?

Compared to open a closed mortgage offers little to no privileges in paying off your mortgage early. You cannot pay off your mortgage without attracting penalties, called prepayment penalties, from the lender. Often though, you do have the ability to prepay up to 15-20% of the original mortgage balance, each year. 

Warning! Not all closed mortgages are created equal check with your mortgage specialist as to how your prepayment penalties are calculated. The difference between one lender's definition of penalty to another lender is enormous.

5. What is a fixed rate mortgage?

It simply means that for the term of your mortgage the interest rate charged is a fixed amount and does not change during the term of your mortgage. If you look at our rate comparisons you will see this distinction between fixed and variable rates.

6. What is a Variable Rate mortgage?

Compared to a fixed rate mortgage a variable interest rate 'floats'. Although the mortgage payment amount may stay the same the actual interest charged may change on a monthly basis. A drop in interest rates is great news for you and it will mean that more of your mortgage payment will go towards reducing your mortgage principle. If interest rates rise then less money will be used for reducing your principle and will instead be used for paying higher interest costs. If you think interest rates will fall over the next 3 to 5 years then purchasing a variable mortgage makes a lot of sense.

With mortgages you pay a price for certainty. You generally pay more for a fixed rate mortgage because the lender is taking the risk as to what the rates will do by fixing the rate for you. You generally pay less for a variable rate mortgage because it is you that is taking the risk of uncertainty as to how interest rates will move - up or down.

With low interest rates variable interest rate mortgages have become popular. Often it is possible to get a rate just over or under the bank prime rate!

7. Should I pay my mortgage payment weekly, bi-weekly, or monthly?

Paying weekly or biweekly gets more money onto your mortgage over the year. This will add up to paying your mortgage down faster over the long term.

If your mortgage payment was a $1000 a month, and you paid it weekly at $250/week, at the end of the year you would have paid $13,000 towards your mortgage as opposed to $12,000 paying monthly.

If it fits your paydays, then take a weekly or biweekly payment. If it doesn't, pay monthly, and put an extra payment on once a year...you will get almost the same benefit!

Another example:

Assume a mortgage amount of $420,000 with 5.35% APR with 5 year term over 30 year amortization.  The monthly payment is $2,330.02 and the interest cost for the mortgage lifetime would be $418,805.31.

Step 1:  Change to a bi-weekly payment of $1,165.01  - save $81,605.69 

Step 2:  Now add an extra $100 to your payment and see your savings grow!

Monthly payments would be $2430.02 with a savings of $76,890.66 

Change to bi-weekly payments of $1,265.01 - save $111,840.96!

 

8. What is amortization? And what is the best amortization period to seek?

Your amortization is the total length of time it will take you to pay off your mortgage. Often when you first get a mortgage it is amortized over 25 years. If you make your mortgage payments over 25 years your mortgage will be paid off. However, your amortization period will not stay constant because different borrowing terms at each renewal vary the amount of interest charged over your amortization period. The length of time to pay off your mortgage will be determined by the interest charge, the loan amount and the amount of payment you make. You should first qualify for a 25-year amortization and then change the amortization down to 15 years by making a larger monthly payment. A 15-year amortization is a great goal for everyone. A good rule of thumb is to pay down your mortgage by at least 1% each year from the original amount. Make your monthly payment and add in this "top up" amount. It is the amount of 'extra' payments that you make that reduces your principal, which saves you, interest charges. Another rule of thumb, when interest rates are low, is to make your mortgage payments as large as possible in your monthly budget. If interest rates rise by next renewal keep your mortgage payments the same and ride out the high rates by taking shorter renewal terms. This way you will get in the habit of making the same larger mortgage payment over time and by doing so will save thousands in interest charges.

9. What is a high ratio or insured mortgage?

Whenever you need a mortgage loan that is greater than 80% of the current market appraised value of your home it is considered a high ratio or insured mortgage. In certain situations, and depending on the property and your credit, you can borrow up to 100% of the value of your home. The Canada Mortgage and Housing Corporation (CMHC) and Genworth Financial Canada insure the lender in case you default on your loan. For this service you must pay for this insurance premium, included on top of your loan amount.

10. What is the best term to consider?

Usually the shorter the term, the lower the rate. However many people prefer the comfort of a longer-term mortgage for its stability. We always recommend a longer term for First Time Buyers. Variable rate mortgages are also a very attractive product that may be right for you!

11. Can I have my property taxes included with my mortgage payment?

Yes, most institutions will allow the option of paying your own taxes, or having them included with your mortgage payments. However, some lenders may insist that they be included with the mortgage due to the loan to value ratio!

12. What is the penalty if I sell my house before the term expires?

All lenders will charge a penalty if you pay your mortgage out prior to the end of the term. Usually the penalty is the greater of three months interest, or the interest rate differential, however, this does vary from lender to lender, so be sure to ask us for more information.

13. If I have lived in a home with my spouse but was never on title am I considered a first time home buyer?

Yes, if you have not held title to your principal residence you would be qualified as a 1st time home buyer. There are two programs that would affect you.

1) RRSP homeowner’s plan - allows you to withdraw up to $20,000 from your RRSP tax free* (you have 15 years to pay this money back into an RRSP)

2) Property Purchase Tax Excmption - if you have not owned any real estate as your principal residence anywhere in the world you would be exempt. (Province of British Columbia)

14. How long does it take for my RRSP’s to be withdrawn?

It largely depends on the RRSP issuer. If you have money in cash accounts, typically you can get access to these monies right away but if your money is in mutual funds it can take up to 3 weeks for the request to be processed. I recommend that you contact your issuer to get the accurate amount of time so that you are prepared.

15. How much can I afford to pay for a home?

To determine 'affordability' your consultant will first need to know your Taxable Income along with the amount of any debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing, they will then calculate 32% of your income for use toward a mortgage payment, property taxes and heating costs. If applicable, half of the estimated monthly condominium maintenance fees will also be included in this calculation.

Second, your consultant will calculate 40% of your Taxable Income and deduct all of your monthly debt payments, including car loans, credit cards, line of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on Lenders' usual guidelines.

In addition to considering what the ratios say you can afford, make sure you calculate how much you think you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.

16.  Should I have a home inspection and what is it?

A home inspection is a visual examination of the property to determine the overall condition of the home. In the process, the inspector should be checking all major components (roofs, ceilings, walls, floors, foundations, crawl spaces, attics, retaining walls, etc.) and systems (electrical, heating, plumbing, drainage, exterior weather proofing, etc.). The results of the inspection should be provided to the purchaser in written form, in detail, generally within 24 hours of the inspection.

A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.

17. What minimum down payment is needed to buy a home?

A down payment of 5% of the purchase price can be used to purchase a home.  In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable).

Lenders will generally accept a gift from a family member as an acceptable down payment provided a letter stating it is a true gift, not a loan, is signed by the donor. Where the Mortgage Loan Insurance is provided by insurance provider, the gift money is not required to be in your possession until the closing date.

Mortgages with less than 20% down must have Mortgage Loan Insurance provided by either CMHC or private provider.

100% financing programs are available with most lenders as well, each lender has specific guidelines.

18. Why should I use a Mortgage Consultant?

We are able to negotiate on your behalf, structuring your mortgage to meet the criteria of the lenders, and therefore getting a mortgage solution that works for you.

Financial Institutions can only offer their own products to the public through their sales force. As a result, they are not able to provide unbiased advice or selection since by doing so they risk losing your mortgage to a company whose product may provide more value to you. At the Invis- The Siemens Group on the other hand, we offer a wide variety of mortgage products and services as we deal with many lenders, not just one. Because of this we are able to search for product from a variety of lenders, including banks, trust companies, insurance companies, credit unions and private lenders, for the one that offers the best product, rate and terms for your particular needs. Thus, we can be totally objective in our recommendations to you.


19. How much does it cost to use a Mortgage Consultant?

Institutional lenders in order to gain market share from Mortgage Brokerage companies and individual brokers, pay a finder's fee for referred business. Due to the volume of business generated by Invis and the excellent reputation of its Mortgage Consultants, fees are paid by the lender and we at Invis- The Siemens Group receive fast approvals in order to gain their business. This allows us to shop among the various financial institutions and private lenders for the mortgage rate and product that best suits the needs of the client and, in almost all cases, at no cost to you the client.

When you deal directly with a Financial Institution and your mortgage is declined, for whatever reason, you must begin the application process all over again with another Lender. When you deal with us the application can quickly be redirected to another Lender, or several other lenders, for consideration.

In situations where traditional lenders will not approve a mortgage because of poor credit, and where the application must be placed with a private or non-traditional lender, a brokerage fee may be charged to the client. This cost must always be disclosed to the client up front and must be authorized in writing by the client before it can be charged.

20.  Is applying on line secure?

Very. Your private personal and financial information is not sent anywhere without your express permission. Our Apply Online form is sent directly to our mortgage application software. And all information you provide on line is encrypted for the greatest possible security.

21.  Does bankruptcy affect my ability to qualify for a mortgage?

Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing. If you are a previously discharged bankrupt the best way to determine whether or not you qualify at this time is to discuss your situation with us. We have many lenders to approach based on your circumstances.

22. How will child support and alimony affect my mortgage qualification?

Where Child Support and Alimony are paid by you to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for.

Where Child Support and Alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.


23. Can I get a mortgage to purchase a home and make improvements?

Subject to qualification, yes.  In fact, even purchasers with 5% down may qualify to buy a home and make improvements to it. For high-ratio financing, both Canada Mortgage and Housing Corporation and private insurers will insure mortgages  to cover the purchase price of a home as well as an amount to pay for immediate major renovations or improvements that the purchaser may wish to make to the property. This option eliminates the need to finance the renovations or improvements separately. Some conditions apply.

Where the improvements are cosmetic, the Mortgage Loan Insurance Premium is unchanged from the standard schedule. Where the improvements are deemed to be structural, the Mortgage Loan Insurance Premium is increased by .50% over the standard schedule.

24. Is it necessary to wait for my mortgage to mature?

No, begin shopping around for an interest rate at least 90 days before your mortgage matures. Lenders will often guarantee an interest rate to you as much as 90 days before your mortgage matures. And, as long as you are not increasing your mortgage, they will cover the costs of transferring your mortgage too. This means a rate promised well in advance of your maturity date, thus eliminating any worries of higher rates. And if rates drop before the actual maturity rate, the new lender will usually adjust your interest rate lower as well.

Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always ask us investigate the possibility of a lower interest rate with the lender or another lender. If you don't you may end up paying a much higher interest rate on your renewing mortgage than you need.

 

Here are some of the lenders that we negotiate with:

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Click here to see the best rates!

 

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"As the leading independent mortgage broker in Canada our reputation is of critical importance to us.

We provide our Invis mortgage consultants with comprehensive training and support to ensure we are the best in the business.

If your experience as our customer does not meet your expectations please contact us so that we may address your concerns."  

 

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